Correlation Between East Money and Lutian Machinery

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Can any of the company-specific risk be diversified away by investing in both East Money and Lutian Machinery at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining East Money and Lutian Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Money Information and Lutian Machinery Co, you can compare the effects of market volatilities on East Money and Lutian Machinery and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in East Money with a short position of Lutian Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Money and Lutian Machinery.

Diversification Opportunities for East Money and Lutian Machinery

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between East and Lutian is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding East Money Information and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery and East Money is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on East Money Information are associated (or correlated) with Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of East Money i.e., East Money and Lutian Machinery go up and down completely randomly.

Pair Corralation between East Money and Lutian Machinery

Assuming the 90 days trading horizon East Money Information is expected to generate 1.58 times more return on investment than Lutian Machinery. However, East Money is 1.58 times more volatile than Lutian Machinery Co. It trades about 0.09 of its potential returns per unit of risk. Lutian Machinery Co is currently generating about 0.01 per unit of risk. If you would invest  1,399  in East Money Information on August 25, 2024 and sell it today you would earn a total of  1,191  from holding East Money Information or generate 85.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

East Money Information  vs.  Lutian Machinery Co

 Performance 
       Timeline  
East Money Information 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in East Money Information are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East Money sustained solid returns over the last few months and may actually be approaching a breakup point.
Lutian Machinery 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lutian Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

East Money and Lutian Machinery Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with East Money and Lutian Machinery

The main advantage of trading using opposite East Money and Lutian Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Money position performs unexpectedly, Lutian Machinery can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lutian Machinery will offset losses from the drop in Lutian Machinery's long position.
The idea behind East Money Information and Lutian Machinery Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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